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Bitcoin Bridged Trustlessly to L2; Ethereum’s Blob Mob

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Welcome to The Protocol, CoinDesk’s weekly wrap-up of the most important stories in cryptocurrency tech development. I’m Marc Hochstein, CoinDesk’s deputy editor-in-chief for features, opinion and standards.

IN THIS ISSUE:

  • Ethereum’s blob mob
  • Staking on Starknet
  • Avalanche’s big upgrade
  • L2 teams beam over Beam Chain
  • Sui suffers a brief outage
  • Bitcoin bridged, trustlessly

This article is featured in the latest issue of The Protocol, our weekly newsletter exploring the tech behind crypto, one block at a time. Sign up here to get it in your inbox every Wednesday. Also please check out our weekly The Protocol podcast.

Network news

BEAMING OVER THE BEAM CHAIN: What’s good for the L1 is good for the L2s. That’s the assessment the teams behind zkSync and Polygon, two of the leading layer-2 networks running on top of Ethereum, gave of Justin Drake’s proposal to overhaul the $400 billion blockchain, dismissing suggestions it would make their auxiliary networks redundant. “That’s really a misconception,” said Alex Gluchowski, the CEO of Matter Labs, the developer firm behind zkSync. “The changes that Justin announced are focused on the consensus layer, not on the execution layer. It’s not going to affect the execution layer.” In addition to incorporating ZK, Drake’s proposal seeks to shorten block times, which could cut transaction costs for L2s settling on Ethereum. Drake also said he wants to introduce single-slot finality, meaning blocks with transaction data could be finalized immediately, and that information would become permanent right away. “All of those things are great because we depend on Ethereum as the global settlement layer,” Gluchowski said. Brendan Farmer, a co-founder at Polygon, also told CoinDesk he doesn’t think the Beam Chain would obsolesce layer-2s. Instead, he said, the upgrade would “make rollups work better.” However, others in the crypto community were underwhelmed by the whole plan, lamenting in particular that Drake’s five-year timeline wasn’t ambitious enough, leaving ample room for centrally-developed chains like Solana to eat Ethereum’s lunch.” Read more

SUI OUTAGE: Sui Network (SUI), a relatively new blockchain, experienced an unexpected two-hour outage on Thursday. The downtime was caused by a bug in its transaction scheduling logic, which led to its validator network crashing. The issue was resolved, the network said. Blockchain outages can take place for a plethora of reasons, ranging from a 51% attack to technical errors. A common error is that of nodes – or individual entities that process transactions – being unable to sync with each other, causing the blockchain to go offline. Software bugs may be another error vector, where outdated code can render the network’s processes inoperable. Read more

STAKING ON STARKNET: Starknet has become the first major rollup blockchain running on top of Ethereum to let users earn money by staking their tokens and validating transactions. (Metis was the first layer-2 to do so but is far smaller and is an “optimium,” a different kind of L2.) Now, anyone who has at least 20,000 STRK tokens (roughly $12,000 at recent prices) can pledge the asset as collateral and earn rewards for validating transactions. Users with less than 20,000 STRK can delegate their tokens to validators to stake on their behalf. (Validators that behave maliciously or neglect their duties stand to forfeit staked tokens.) Validators and delegators that want to withdraw staked tokens must wait 21 days to receive them as well as any rewards earned from staking. Implementing staking on Starknet is part of a multiphase plan. During this first phase, StarkWare, the company developing Starknet will study staking habits on the network, and from there will assess whether and how its validators can be given the additional responsibilities of creating and “attesting,” or confirming, blocks in the protocol. Read more

AVALANCHE’S BIG UPGRADE: Avalanche, the eighth-largest blockchain by total value locked (TVL), is moving ahead with a major technical makeover. The Avalanche9000 upgrade went live in a test network environment Monday, bringing the changes one step closer to the main network. Avalanche9000 will be the largest upgrade that Avalanche has seen. It is designed to cut the costs of sending transactions, operating validators and building apps on the network, whose native token (AVAX) is the 11th-largest cryptocurrency, with a $16 billion market cap. The foundation is trying to attract developers to Avalanche and encourage users to create customized blockchains using its technology, known as subnets. Somewhat confusingly, subnets are now officially referred to in the Avalanche community as “L1s,” even though they are roughly analogous to the layer-2, or L2, networks that augment Ethereum and other blockchains. (Avalanche’s “primary network,” the equivalent of a layer-1 in other ecosystems, is considered a subnet.) The team is hoping to bring Avalanche9000 to mainnet by yearend. Among other changes, 9000 would allow for a new type of validator with which anyone can launch their own subnets. Read more

ONE-WAY TICKET: BitcoinOS, a smart contract project led by crypto O.G. Edan Yago, has executed what it bills as the first trustless bridge transaction for any blockchain. Using zero-knowledge cryptography, a nominal amount of bitcoin (0.0002 BTC, about $19 and change) was locked up on the main blockchain’s testnet, and a proof was generated minting tokens on the testnet for Merlin Chain, a layer-2 network. No oracle or custodian was involved, according to BitcoinOS. For now, however, Merlin Chain is like the Hotel California or a roach motel for the bridged BTC. “This is one half of the bridge showing the ability to bridge assets from Bitcoin to an EVM,” BitcoinOS said in a press release. “Once the other half of the bridge is completed, Merlin Chain users can settle their Bitcoin-pegged assets back to the mainchain by proving that the tokens were burned.”

Ethereum’s Blob Mob

Usage of binary large objects, or blobs, has surged on the Ethereum network, signaling that more users are embracing layer-2 scaling tech for faster and more affordable transactions.

This year, Ethereum’s Dencun upgrade introduced blobs, which allow large chunks of data to be temporarily attached to transactions, and later deleted after the data is verified. (You can think of a blob as a sidecar that rides along with a motorcycle for a time but eventually gets detached and discarded.) Layer-2 protocols such as BASE, Arbitrum, and Optimism use blobs to bundle transactions together, process them off-chain and then post them to the Ethereum main chain for verification without permanently gumming up the works.

The number of blobs posted to the network consistently averaged more than 21,000 this month, matching the record activity seen in March, according to pseudonymous data analyst Hildobby’s Dune Analytics dashboard.

Posting blobs costs a fee, which fluctuates depending on network conditions. The fees are paid in Ethereum’s native token ether, and are burned just like regular transaction fees, taking supply of ETH off the market, a positive for the coin’s price.

In this way, blobs mitigate the much-discussed cannibalization of the main chain by L2.

The blob base submission fee spiked as high as $80 on Monday, the highest since March, and the average number of blobs posted in each Ethereum block rose to 4.3. More importantly, blob fees have burned over 214 ETH worth $723,000 over the last seven days, the sixth largest source of fee burns on the network over that period, according to data from ultrasound.money.

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Hedera

Hedera’s HBAR momentum has just began, analyst says

Published

2 weeks ago

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November 15, 2024

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Hedera Hashgraph was one of the best-performing cryptocurrencies on Friday, November 15, as a popular crypto analyst made his bullish case.

Hedera Hashgraph (HBAR) price rose to $0.0767, its highest level since July 17, and 66% above its lowest level this month. 

In an X post, a trader known as Maverick, who has over 145,000 followers, said that HBAR’s climb had just begun. He believes that it can surge to the year-to-date high of $0.1813, which is about 182% higher than the current level.

Maverick cites the rising Hedera Hashgraph’s volume and the recent application of a spot ETF by Canary Capital as a potential catalyst. There is a likelihood that Donald Trump’s Securities and Exchange Commission would easily approve such an ETF.

Another potential catalyst for Hedera Hashgraph is that its futures open interest has been in a strong uptrend. It jumped to $66.7 million, up from $26.6 million in September, a sign that it is seeing strong demand.

Still, Hedera Hashgraph has numerous challenges. For one, while it counts large companies like Ubisoft, Dell, Boeing, Google, and Deutsche Bank as members of its governance council, its ecosystem is fairly small. 

For example, it has a DeFi total value locked of just $44 million, making it much smaller than newer blockchains like Sui and Base Blockchain. DEX networks in its ecosystem handled tokens worth $35.4 million in the last seven days, making it the 32nd biggest chain in the industry.

HBAR price could hit $0.1 soon

SHIB price
HBAR price chart | Source: crypto.news

The daily chart shows that the Hedera Hashgraph price has bounced back in the past few days. This recovery happened after it formed a double-bottom pattern around the support at $0.045. In most periods, this is one of the most bullish patterns in the market.

Hedera has also soared above the key resistance level at $0.063, the neckline of this pattern. It has also jumped above the 50-day and 200-day moving averages. 

Therefore, the path of the least resistance for the coin is bullish, with the next psychological level to watch being at $0.10, which is about 45% above the current level. The stop-loss of this trade will be at $0.055.





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Polkadot price forms a rare pattern, 76% jump possible

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3 weeks ago

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November 8, 2024

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Polkadot price may be preparing for a major bullish breakout as a rare pattern that has been forming since August nears its completion.

Polkadot (DOT), a top layer-1 network, was trading at $4.30 on Friday, Nov. 8 after rising for four consecutive days. It has jumped by 18% from its lowest point this year month, meaning that it is approaching a bull market. 

Crypto analysts are bullish on Polkadot despite of its weak fundamentals. One of the main themes has been a falling wedge pattern that has been forming since Aug. 1. In an X post, a crypto analyst known as Globe of Crypto, estimated that the coin could jump to between $9 and $10 when the break out happens. If this happens, it will see DOT token more than double.

A potential catalyst for the Polkadot price is the new connection of the network to other chains like Ethereum, Optimism, Arbitrum, Base, and Binance Smart Chain. This connection, which has been enabled by Hyperbridge, means that users can move assets across these chains without relying on middlemen. 

Meanwhile, there are signs that open interest in the futures market is picking up momentum. DOT’s open interest rose to over $269 million, its highest level since June 17. It has had a strong comeback after bottoming at $179 million in September. 

Still, the biggest challenge for Polkadot is that it has not gained a lot of traction among developers. Its ecosystem growth has been relatively weak such that it has been passed by other newer networks like Base and Sui.

Polkadot price analysis

Polkadot price
DOT chart by crypto.news

The daily chart shows that the DOT price has been in a tight range in the past few months. In this period, it has constantly remained below the 50-day and 100-day moving averages.

On the positive side, it has formed a falling wedge pattern, which is now nearing the confluence level. Such a move, especially at a time when oscillators like the Relative Strength Index (RSI) and Stochastic have pointed upwards, is a sign that the coin will soon have a bullish breakout. 

If this happens, Polkadot price may jump to $7.77, its highest swing since May 27 and the 50% Fibonacci Retracement point. If this happens, the token will jump by 76.50% from the current level. This view will become invalid if it moves below this month’s low at $3.66.



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Toncoin nears a dreaded pattern despite strong on-chain metrics

Published

2 months ago

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October 1, 2024

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The Toncoin token remained in a bear market and was at risk of forming the dreaded death cross pattern, despite strong on-chain metrics.

Toncoin (TON) was trading at $5.81 on Monday, Sep. 30, down by over 30% from the year-to-date high.

Strong on-chain metrics

Additional data showed that the number of on-chain activated wallets has risen to over 20.8 million, a significant increase from January’s low of 1.1 million.

Moreover, the number of Toncoins burned daily has continued to rise, reaching the year-to-date high of almost 39,000. These burns have coincided with a sharp decline in the number of minted Toncoins, which has dropped to 39,000 from this month’s high of over 50,000.

Toncoin nears a dreaded pattern despite strong on-chain metrics - 1
TON Blockchain fees have risen | Source: TonStat

Role in DeFi is fading

Toncoin’s price has likely retreated due to its waning role in the decentralized finance industry, where the total value locked in the network has dropped from over $765 million in July to $427 million.

TON has moved from being a top ten player in the DeFi industry to becoming the 20th-biggest chain. Smaller chains such as Core, Mode, Mantle, and Linea have surpassed it in recent weeks.

Toncoin has also dropped because of Pavel Durov’s recent arrest in France and the performance of its tap-to-earn tokens. Hamster Kombat, which launched its airdrop last week, has dropped by almost 60% from its highest level.

Similarly, Notcoin (NOT) dropped by 71%, while Catizen (CATI) has fallen by 50% from their all-time highs. Most of all the recently launched Telegram’s tap-to-earn tokens have dropped to record lows.

Meanwhile, Toncoin’s futures open interest dropped to $260 million on Sep. 30, down from the year-to-date high of over $360 million. This figure has reached its lowest point since Sep. 12, indicating waning demand.

Toncoin price analysis

Toncoin price
Toncoin price chart | Source: TradingView

Toncoin’s token has dropped by over 30% from its year-to-date high, and the 50-day and 200-day Exponential Moving Averages are close to forming a death cross pattern. The last time it formed this pattern in May of last year, it resulted in a drop of over 50%.

TON has also formed a head and shoulders and a rounded top pattern. It remains below the first support level of the Andrew’s pitchfork tool and the 23.6% Fibonacci Retracement level.

Therefore, Toncoin may have a bearish breakout to the next key support at $4.45, its lowest point in September, unless it moves above the 50-day and 200-day moving averages.



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